Caterpillar CEO says Davos outlook too glum

WilliamL. Watts

DAVOS, Switzerland (MarketWatch) -- Citing strong growth in emerging economies and expectations for no worse than a mild U.S. downturn, the CEO of Caterpillar Inc. says he's escaped the economic gloom enveloping the annual meeting of the World Economic Forum.

"I think I'm considerably more optimistic than the mood here in Davos," James Owens, top executive of the Peoria, Ill.-based construction and mining equipment giant
CAT, -0.38%
said Friday.

In a brief interview on the sidelines of the World Economic Forum's annual meeting, Owens said he expects "either a mild recession or a soft landing" on tap for the U.S. economy.

Many of the discussions at the annual gathering of top corporate executives, politicians, regulators and others in the Swiss mountains have been dominated by concerns that the world's economy could slip into a severe recession following the bursting of the housing bubble.

Some economists have also called into question once widely held expectations that emerging economies, which have enjoyed strong, commodity-led growth, would remain largely insulated from the downturn, providing the world with an alternative engine of growth.

Issues surrounding subprime mortgages "have been with us for a while," Owens noted, adding that he believes the correction in the wake of the housing bubble is already under way.

Meanwhile, monetary- and fiscal-policy responses to signs of economic weakness have been "good," the CEO said.

The Federal Reserve on Tuesday made a surprise cut of three-quarters of a percentage point in its key interest rate. See full story.

And on the fiscal side, President Bush and congressional leaders on Thursday reached agreement on a $150 billion stimulus plan. See full story.

Owens said he expects to see "a bit of decoupling" between the world economy and the United States, pointing to extremely strong growth in the Middle East, Russia and other emerging economies, where the commodity boom has fostered strong balance sheets.

Also Friday, Caterpillar, a component of the Dow Jones Industrial Average, reported a fourth-quarter profit of $975 million, or $1.50 a share, up from $882 million, or $1.32 a share, earned in the final three months of 2006. Revenue rose 10% to $12.14 billion. See full story.

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